Fitch Ratings has reaffirmed the long-term issuer default rating (IDR) for the African Export-Import Bank (Afreximbank) at ‘BBB’, with a stable outlook.
This decision reflects the bank’s robust financial health and its increasing importance within the African continent. In addition to the long-term IDR, Fitch also affirmed Afreximbank’s short-term IDR at ‘F2’ and the ratings on the bank’s Global Medium Term Note Programme and debt issuances at ‘BBB’.
The reaffirmation by Fitch recognizes Afreximbank’s solid profile and its growing systemic relevance in Africa. The bank has taken on several key mandates from the African Union (AU), including spearheading the health response to the COVID-19 pandemic and facilitating access to grains and fertilizers during the ongoing Russia-Ukraine conflict. These responsibilities underscore the bank’s critical role in addressing major challenges faced by African nations.
Afreximbank’s strong capitalisation and liquidity positions were key factors in Fitch’s affirmation. The bank has demonstrated excellent internal capital generation, largely driven by ongoing shareholder support through the AU-initiated General Capital Increase (GCI) under its current strategic plan, Plan VI.
This initiative aims to raise $2.6 billion in paid-in capital. Since the GCI was launched in August 2021, Afreximbank has successfully mobilised $2.1 billion in gross paid-in equity, showcasing significant progress towards its capitalisation goals.
Fitch noted that Afreximbank’s liquidity profile is notably strong, with 53% of its quality treasury assets rated ‘AA’ to ‘AAA’ in 2023, significantly above the ‘strong’ threshold of 40%. This robust liquidity position is further supported by the bank’s access to capital markets and alternative liquidity sources, even during challenging times. This demonstrates Afreximbank’s resilience and its capacity to maintain stability in fluctuating economic environments.
In addition to its strong liquidity, Afreximbank has excelled in de-risking its lending portfolio. The bank maintains a low concentration risk and a high degree of loan collateralisation.
In 2023, 85% of its total loans were collateralized, with 20% covered by cash collaterals and 8% by credit insurance from ‘A’ to ‘AA’-rated insurers. These measures have helped Afreximbank keep its non-performing loan ratio relatively low, despite operating in a high-risk environment. Fitch assessed the bank’s risk management policies as ‘moderate’, acknowledging the effective use of credit risk mitigants.
Satisfaction with Fitch’s rating Affirmation
Denys Denya, Afreximbank Group Senior Executive Vice President, expressed satisfaction with Fitch’s rating affirmation. He noted that Fitch rates the bank ‘a-’ on a standalone basis, before adjusting two levels down due to the operating environment.
This standalone rating underscores the bank’s systemic relevance to Africa and acknowledges its strong delivery of its developmental mandate, prudent risk management practices, and focus on capital and liquidity, all of which have culminated in robust financial performance.
Denya highlighted that Afreximbank and its subsidiaries play a pivotal role in facilitating trade and investment across its member states. The bank’s robust relationships and its integral role in achieving the AU’s key strategic economic programs and initiatives, such as the African Continental Free Trade Agreement (AfCFTA) and the management of the AfCFTA Adjustment Fund, are testaments to its significant contribution to the continent’s economic development.
Moreover, Afreximbank has been resourceful and agile in its countercyclical role, supporting member states in mitigating the impacts of various economic challenges. These include the 2015 commodity price crisis, the COVID-19 pandemic, the Russia-Ukraine crisis, and the current African debt crisis. The bank’s ability to adapt and provide necessary support during such times underscores its resilience and strategic importance.
Meanwhile, Afreximbank said it is grateful for the support of the AU and its member countries in its capital and deposit mobilisation efforts. This support is crucial for the bank to continue its mission of enhancing trade and economic development across Africa.
Fitch’s reaffirmation of Afreximbank’s ratings highlights the bank’s strong financial health, systemic importance, and effective risk management. The bank remains a cornerstone of Africa’s economic infrastructure, playing an important role in addressing the continent’s developmental challenges and facilitating sustainable growth.
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